WORKING
P A P E R
The Role of
Energy Efficiency in
Homebuying Decisions
Results of Initial
Focus Group Discussions
MARK HANSON and MARK A. BERNSTEIN
WR-352-CONSOL
March 2006
Prepared for ConSol
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Summary
Various government agencies, advocacy groups, researchers, and homebuilders
have struggled to understand what role, if any, energy efficiency plays in homepurchase decisions, and how to make energy-efficient homes more attractive to
consumers.
Overview
In 2004–05, Premier Homes and Cresleigh Homes built and sold 95 and 98 new
homes, respectively, on a shared tract of land outside Sacramento, California.
Most homeowners were able to choose from comparable homes from either
builder. The two groups of homes themselves differ most in their levels of
energy efficiency.
Both homes have several energy-efficient modifications, including denser
insulation, low-emissivity windows, etc. Importantly, the Premier homes have
rooftop solar panels and tankless water heaters, while the Cresleigh homes do
not. The Cresleigh homes were certified by the local utility, the Sacramento
Municipal Utility District (SMUD) as performing approximately 30 percent more
efficiently to cool than homes built to California’s “Title 24” energy standard.
The Premier homes were certified to perform 60 percent more efficiently than
homes built to California’s Title 24 energy standard. The Premier homes are also
considered “Zero Energy Homes” (ZEH), according to the U.S. Department of
Energy’s Building America program. In this report, we identify Premier Homes
products as ZEH homes, their owners in our sample as ZEH homeowners,
Cresleigh Homes as non-ZEH homes and their owners as non-ZEH
homeowners.
In a series of focus group discussions with owners of these homes conducted in
October 2005, we gathered information on how these two groups of homeowners
made their recent purchase decisions, the influence of builders and others on
their decision, and the role energy efficiency has played in their homeownership
experience more broadly. In our analysis, we explored potential differences in
the ZEH and non-ZEH homeowners’ preferences at the time of their purchases,
and what may account for these differences. Because variability in decision
factors other than energy efficiency have been minimized in this arrangement of
homes, we regard differences among statements of homeowners in these two
v
groups to yield potentially important insights into how consumers considered
energy efficiency among many other considerations.
Study Area and Sample
The 193 homes in our study area (95 and 98 homes, respectively, in ZEH and
non-ZEH home developments in the shared tract) share the same streets and are
served by the same amenities in the surrounding community. The homes appear
to be relatively more affordable by comparison to the rest of the state, yet more
expensive, on average, than those in the surrounding areas. Participants in our
study included 24 ZEH homeowners and 6 non-ZEH homeowners, together
representing 16 percent of all households in the study area. Participants were
recruited through mailings to all homes in the tract and screened by phone to
verify their eligibility to participate in our study.
The homeowners in our sample were well-educated and relatively high incomeearners. ZEH homeowners reported owning more homes in the past, having
higher educational attainment, and engaging in a more thorough and discerning
search for a home than did non-ZEH homeowners. Non-ZEH homeowners in
our sample reported earning higher incomes and having larger households to
satisfy.
Findings
Given the limitations of the research approach, the results presented in this
Working Paper should be considered as preliminary. Among concerns for our
approach are the small sample size and self-selection of our sample, the
reliability issues of post-decision interviewing, whether homeowners in our
study area represent homeowners in other communities, and whether our
interpretation of their views represent energy-efficiency considerations more
broadly. Nonetheless, our findings in many ways corroborate evidence reported
elsewhere in the literature. Moreover, they indicate promising new lines of
inquiry and hypotheses that can be more rigorously tested in further research
efforts. This report is intended to share preliminary findings, invite comment
and discussion among the energy-efficiency research community, and continue
progress made on better understanding the issues surrounding homebuying
decisions.
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Considerations in Home Purchase Decisions
Homebuyers in our sample engaged in a complicated decision process involving
lifestyle considerations, real estate market pressures, and financing and timing
constraints, as well as different preferences for energy cost savings and comfort
amenities. Where these values appeared to separate most clearly among ZEH
and non-ZEH homeowners was in an apparent trade-off between potential
energy savings and floor area of available homes.
The Builder’s Role in Home Purchase Decisions
According to the participants in our discussions, energy-efficiency information
was relatively incoherent in its presentation by builders’ sales staff to
homeowners before the sale. While materials that described the energy-efficiency
merits of these homes (e.g., potential for energy cost savings) were available
from the utility, this information was seldom presented in a manner that may
have influenced the purchase decisions. The potential for energy-efficiency
considerations to influence the decisions appeared to depend largely on
homeowners’ prior knowledge regarding energy efficiency, which in the case of
the non-ZEH homeowners in our sample appeared to be less than that of ZEH
homeowners.
Homeownership Experience and Energy Efficiency
The experiences in their current and past homes varied among the ZEH and nonZEH homeowners in our sample. For all homeowners in our sample, home size
mattered and more was generally preferred, just as national surveys report. But
to ZEH homeowners, energy efficiency appears to have mattered more at the
time of their recent purchases. The preference for energy efficiency among ZEH
homeowners appears to be associated with relatively greater awareness of its
value, despite an apparent lack of effort by the builder to promote this feature.
While the decision to purchase a larger non-ZEH home may be associated with
higher income and larger households, awareness of the value of energy
efficiency in non-ZEH homeowners appeared to have grown over the past year
of homeownership, having been associated with paying energy bills and
communications with ZEH homeowner neighbors whose bills are substantially
lower.
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Options for Further Research
Homebuying decisions are complex. Research on homebuyer response to Zero
Energy Homes is limited. Encouraging consumer demand for energy efficiency
remains a challenge. Further research is needed and our findings suggest at least
three promising lines of inquiry: (1) mixed-method approaches to understanding
consumer valuation of energy efficiency in home purchase decisions; (2)
exploring “comfort” and “quality” associations with energy efficiency for their
marketing potential; and (3) investigating the impact of neighborhood design on
homeowner’s attitudes toward energy efficiency of their homes, and future
home purchases.
Research on Homebuyer Decisionmaking
We recommend further research efforts that employ interviews with builders,
focus group discussions with homeowners, and also survey and econometric
methods, together to triangulate information on homebuyer decisionmaking. A
systematic, qualitative approach that considers decisions in “story-based” terms,
in combination with consumer surveys that assess more rigorously the various
decision elements along with econometric analyses that validate them in the
actual purchases, may better inform our understanding of complex consumer
preferences. Open questions remain:
x
How do homebuyers value energy efficiency among myriad other
considerations when purchasing a home?
x
Under what conditions does the value of energy efficiency increase in
relation to other decision elements, and reveal itself in actual purchase
decisions?
x
Can a more persuasive “story” motivate consumer demand for energy
efficiency?
Research on Marketing Energy Efficiency
Saving money on energy use appeals to homeowners, yet convincing
homeowners to pay up-front for savings in the future remains a tough sell. In
other words, home features that promise “comfort” or “quality” often have
greater appeal to homebuyers than features that promise “energy efficiency.”
However, builders and homeowners name several amenities that serve multiple
purposes including energy efficiency (e.g., multi-zone HVAC systems that better
moderate temperatures, trellises and gazebos that can support solar panels, and
viii
low-emissivity windows that protect furnishings from sun damage). The
potential for cross-selling energy-efficient “options” according to their promise
of comfort and quality remains open. To this end, further research can address
the following questions:
x
What are the comfort and quality dimensions of various energy-efficient
home features?
x
What are proven strategies for marketing these energy-efficient features,
according to their comfort and quality dimensions?
x
What have we learned from the Energy Star labeling program experience
for appliances that is relevant to new home construction and sales?
In addition, builders are required to initiate homeowner associations in new
subdivisions. Yet the potential for builders and utilities to incorporate rewards
for energy-efficient behaviors into more formal agreements (i.e., through
covenants, codes, and restrictions) appears to be untapped. Local utilities might
be involved, for example, in rewarding neighborhood communities that
committed to certain energy-efficiency innovations. Potential homebuyers might
find such neighborhoods attractive. Open questions remain:
x
How might builders and utilities coordinate interests through the
development of homeowner associations?
x
How might homebuyers respond to such programs?
Research on Energy Awareness in Neighborhoods
Our findings suggest that interactions among neighbors may have special
relevance for encouraging preferences for energy efficiency. The mix of ZEH and
non-ZEH homes in our study area may be related to the growing awareness in
the non-ZEH homeowners. If this is the case, neighborhood design that
incorporates this may achieve greater energy awareness in the long term,
increase demand for energy efficiency in future markets for new homes, and
have important implications for builders’ strategy as well.
This line of inquiry may have important implications for the recently piloted
Leadership in Energy and Environmental Design program’s Neighborhood
Development (LEED-ND) rating system.1 Open research questions remain:
_________________
1 In partnership with the Congress for the New Urbanism and the Natural Resources Defense
Council, the U.S. Green Building Council is currently piloting its LEED-ND rating system, which
concerns itself with standards for environmentally sustainable building and neighborhood design.
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x
Does energy awareness increase through informal, socially mediated
neighborhood processes?
x
Does heightened energy awareness translate into energy-efficient home
purchases?
x
How might neighborhood design facilitate greater energy awareness?
x